Starbucks is expanding its mobile payment pilots and has received positive feedback from customers paying for their Frappuccinos with iPhones.

The mobile payment system, launched earlier this year, is designed to make the in-store experience more efficient. Via an iPhone app, a Starbucks customer can use their loyalty card number to pay for something. In a nutshell, you input your Starbucks card number into the app, the app gives you a barcode and you pay.

Our research shows that both Starbucks and our customers are uniquely well-suited to benefit from rapidly advancing mobile payment and mobile gifting technologies. In Q3 we took our initial step in offering these capabilities by launching our new mobile payment application, allowing customers at Starbucks stores in more than 1,000 Target stores and a small number of Company-operated stores in Seattle and Silicon Valley to pay for their purchases with their smartphones. We now believe that offering mobile payment and mobile gifting capabilities will result in a more efficient in-store experience and provide us with significant competitive advantages and further differentiate Starbucks from competitors. And based on early success and positive customer feedback, we are committed to expanding this program in the months ahead.

If successful, Starbucks mobile payment approach could be mimicked by other retailers.

Among other key Starbucks items on the innovation front:

Starbucks, which has the largest Wi-Fi network in the U.S., will launch a digital network in partnership with Yahoo. The idea is to offer exclusive content, previews, services, free downloads and local community news.

Schultz said the company is also investing in IT. “Other current initiatives underway such as a new point of sale system and a new inventory management system will impact the way our store partners operate and will allow them to focus more time on providing great service to our customers,” he said.

And the most high profile Starbucks innovation is on the Via instant coffee. Schultz argued that Via can be a $1 billion business. At this juncture, Starbucks executives said they are expanding distribution for Via to roughly 35,000 outlets. Thus far, half of Via consumption is at home in the U.S. and 25 percent at work. Schultz said Via will deliver about $100 million in revenue in fiscal 2010.